Which one of the approaches for the allowance method of accounting for bad debts emphasizes matching bad debts expense with revenue on the income statement?
A)The percentage of accounts receivable approach
B)The percentage of net credit sales approach
C)The direct write-off method
D)The uncollectible approach

Question

Quizplus · Accepted Answer

The percentage of net credit sales approach focuses on estimating the amount of bad debts that can be expected based on the credit sales for a given period. By matching bad debts expense with revenue on the income statement, this approach ensures that the impact of bad debts on profitability is accurately reflected. The percentage of accounts receivable approach also estimates bad debts, but it focuses on the balance of accounts receivable instead of sales. The direct write-off method and uncollectible approach do not emphasize matching bad debts expense with revenue on the income statement.

Which One of the Approaches for the Allowance Method of Accounting